Innovate Mississippi

2012 Mississippi Renewable Energy and Energy Efficiency Report

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INVESTMENT INVESTMENT INVESTMENT Equity investment is a is a driving force behind many ventures, and this is especially true in Equity investment driving force behind many ventures, and this is especially true in the the arearenewable energy projects. A concept often used to illustrate thisthis point is what is area of of renewable energy projects. A concept often used to illustrate point is what is known as the the "ValleyDeath." ThisThis valley is a periodtransition from research andand known as "Valley of of Death." valley is a period of of transition from research development to the the market, wherein the venture will realize positive cash flows. 90 This is development to market, wherein the venture will realize positive cash flows. 90 This is illustrated in Figure 8, which shows a generic representation of the the valley of death; until the red illustrated in Figure 8, which shows a generic representation of valley of death; until the red lineline crosses the horizontal axis, the companyventure is losing money. It is It is also worth noting crosses the horizontal axis, the company or or venture is losing money. also worth noting that technology development in the the energy sector is typically very expensive and can take years that technology development in energy sector is typically very expensive and can take years before they are are deployed in commercially. Project development can also take many months before they deployed in commercially. Project development can also take many months andand even years before they get the the ground successfully. even years before they get off off ground successfully. Valley of Death Valley of Death 500,000 500,000 400,000 400,000 300,000 300,000 200,000 200,000 $ (Actual) $ (Actual) 100,000 100,000 0 0 1 2 13 24 35 46 57 68 79 8 9 101112131415161718192021222324 101112131415161718192021222324 (100,000) (100,000) (200,000) (200,000) (300,000) (300,000) Months Months Total Revenues Total Revenues Total Expenses Total Expenses Ending CashCash Ending © 2009 2009 Mississippi © Mississippi Technology Alliance Technology Alliance Figure 10: 10: The ValleyDeath Figure The Valley of of Death 333333339933 333333339933 It should be noted thatthat there is generally "one sizesize fits all" solutionthe the investment It should be noted there is generally no no "one fits all" solution to to investment problems faced by renewable energy andand energy efficiency-based ventures. Indeed, many of problems faced by renewable energy energy efficiency-based ventures. Indeed, many of these projects have to relyrelymultiple types of financing in order to bridge the the gap between these projects have to on on multiple types of financing in order to bridge gap between development andand commercialization. Mississippi companies have taken advantage of: development commercialization. Mississippi companies have taken advantage of: 2012 Federal Federal Funding pi Renewable EnergyFunding o USDA grant and loan programs loan programs gy Efficiency Report o USDA grant and and Reinvestment Act o American Recovery o American Recovery and Reinvestment Act o o DepartmentEnergy Loans Department of of Energy Loans o o New Markets Tax Credit Program New Markets Tax Credit Program he Status of Renewable Energy ciency in the State of Mississippi 16 | 16a g e g e P |P a

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